40% of Borrowers Fail to Make Payments
After a three-year payment hiatus came to an end this fall, millions of Americans burdened with student loan debt are still not paying their bills. According to a report published by the Department of Education, 40% of the 22 million borrowers with payments due have failed to make a payment as of mid-November. This means that approximately 9 million Americans are currently not making their student loan payments. It should be noted that this figure does not include borrowers who are still in school, recently graduated, or whose payment deadlines were extended due to loan servicing errors.
Interest Continues to Accumulate
Although payments officially resumed in October, interest began accruing again on September 1st. This means that borrowers who do not make payments now will see their overall debt continue to grow. The average monthly bill ranges between $200 and $299 per person, with some borrowers having even higher amounts, according to Federal Reserve data. In total, borrowers resumed paying approximately $10 billion per month in October, as reported by JPMorgan.
Potential Financial Shock and Consumer Impact
The resumption of student loan payments coincides with consumers facing high interest rates and persistent inflation, which have severely impacted their purchasing power. Experts warn that the addition of student loan payments could deliver a financial shock to millions of Americans, potentially affecting their ability to shop at major retailers such as Target, Nike, Under Armour, and Gap.
Hope for Loan Forgiveness Dashed
Many borrowers had hoped that their student loans would be forgiven, but earlier this year, the Supreme Court struck down President Biden’s forgiveness plan, which aimed to erase up to $20,000 in loans per borrower. However, the White House has since announced other efforts to reduce student loan debt, including the erasure of $127 billion of debt owed by approximately 3.6 million borrowers.